In re Adler

• Decision Date: 02 March 1906
• Docket Number: 111.
• Parties: In re ADLER. In re NINTH NAT. BANK.
• Court: U.S. Court of Appeals — Second Circuit

144 F. 659

In re ADLER. In re NINTH NAT. BANK.

No. 111.

United States Court of Appeals, Second Circuit.

March 2, 1906

This is a petition by the Ninth National Bank of New York to review two orders made by the District Court for the Southern District of New York. The first of these orders is dated April 11, 1905, and is as follows:

'Ordered that all proceedings in a certain suit in the New York Supreme Court, County of New York, entitled 'Ninth National Bank, plaintiff, against Marcus A. Adler impleaded with others, defendant,' upon the part of the plaintiff in said action and its attorneys, agents and servants, be, and they are and each of them is hereby stayed as against said Marcus A. Adler for the space of twelve months from the date of the adjudication herein, or if within that time the said bankrupt shall apply for a discharge, then until the question of such discharge shall be determined. And that said plaintiff in said action and its attorneys, agents and servants be, and they are and each of them is hereby, enjoined and restrained during said period from further proceeding in said action, and particularly from proceeding in said proceeding to punish the above-named bankrupt Marcus A. Adler as and for a civil contempt of said Supreme Court.'

The second order is dated May 19, 1905, and is an order denying a motion to vacate the order of April 11, 1905. Adler was adjudicated a bankrupt April 10, 1905.

Nelson S. Spencer, for petitioner.

Charles Strauss, for bankrupt.

Before LACOMBE, TOWNSEND, and COXE, Circuit Judges.

COXE Circuit Judge.

The discussion at the bar and in the briefs has, we think, taken a much wider range than is warranted by the facts. The order complained of simply restrains, during the pendency of the bankruptcy proceedings, a judgment creditor in the state court from attempting to enforce its judgment by proceedings to punish the bankrupt for contempt.

The order was evidently granted under section 11 of the law (Act July 1, 1898, c. 541, 30 Stat. 549 (U.S. Comp. St. 1901, p 3426), which provides that a suit, founded upon a claim from which a discharge would be a release, which is pending at the date of filing the petition, may be stayed until twelve months after the date of adjudication, or, if application be duly made for a discharge, then until the question of such discharge is determined.

It is the obvious scheme of the law to protect the bankrupt during the pendency of the proceedings from being harassed by process issuing from the state courts in civil actions. His presence may be required at any time before the court of referee, and section 7 (30 Stat. 548 (U.S. Comp. St. 1901, p. 3424)), defining the duties of bankrupts, directs him to perform acts which practically require his presence within call of the court at all times during the pendency of the proceedings. It is manifest that it will be impossible for him to comply with 'all lawful orders of the court' if he be required at the same time to obey the orders of the state court, and, a fortiori, if he be actually imprisoned on civil process, issued out of the state court. The bankruptcy act could not be administered under such conditions.

Section 9 (30 Stat. 549 (U.S. Comp. St. 1901, p. 3426)), provides that 'a bankrupt shall be exempt from arrest upon civil process' except inter alia, when issued from a state court 'upon a debt or claim from which his discharge in bankruptcy would not be a release.' General order 12 (32 C.C.A. xvi, 89 F. vii) provides that from the date when he is required to appear before the referee the bankrupt shall be subject to the orders of the court in all matters relating to his bankruptcy 'and may receive from the referee a protection against arrest, to continue until the final adjudication on his application for a discharge,' and general order 30 (32 C.C.A. xxx, 89 F. xii) requires the District Court to discharge on habeas corpus a bankrupt imprisoned upon process in any civil action for the collection of a claim provable in bankruptcy.

It would seem, therefore, that it was the duty of the court to stay the contempt proceedings if the claim were one which could be proved and discharged in bankruptcy; surely to do so was within the sound discretion of the judge.

Section 17 provides that a discharge shall release a bankrupt from all his provable debts except those specifically described in the section. We think the only exception necessary to consider is the last (clause 4, 30 Stat. 550 (U.S. Comp. St. 1901, p. 3428)), which excepts such debts as 'were created by the bankrupt's fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.'

The Supreme Court has held that this subdivision is limited to frauds, embezzlements, misappropriations or defalcations of the bankrupt while acting in an official character or in a fiduciary capacity and does not apply to other...